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Policy shift a pity, taxpayers may now pay more

Policy shift a pity, taxpayers may now pay more for fuel users' emissions.

The move to defer transport fuel's inclusion in the proposed emissions trading scheme by two years doesn't wipe out the emissions bill.

Taxpayers, as opposed to fuel users, will pay instead. The "relief" at the pump is cancelled out via other taxes. It effectively also delays or reduces the size of tax cuts.

The New Zealand Business Council for Sustainable Development says it is a pity the cross-party political consensus reached just last year, on a timetable for introducing all sectors and greenhouse gases sources into the emissions trading scheme, seems to have partly unraveled so soon.

"It won't stop people paying the emissions bill. It just moves it from the pump – where it can influence people to use less fuel and reduce emissions – to the general taxpayer," Business Council Chief Executive Peter Neilson says.

"New Zealand has an international obligation to live within a certain level of greenhouse gas emissions. We buy emission units when we exceed that limit. Yesterday Treasury released figures estimating the cost of this obligation at about $1 billion between 2008 and 2012. Today the Government issues a new estimate of $480.1 million.

"Movements in fuel prices are driven by different forces New Zealand can't control and will be much larger than the likely impact of any climate change policy.

"This two-year delay in devolving the cost of using fuel to fuel users – the actual emitters who can change behaviour – just further delays emissions reductions by New Zealand. It means we may face a bigger bill between 2008 and 2012 than otherwise would be the case.

"Other policies with greater impact on fuel prices, like bio fuels, could have been reconsidered instead. BP has estimated the cost of the current bio fuels regime will be 22 cents per litre.

"Because of concerns over sources of bio fuels, it may have been wiser to consider this policy in more detail, rather than delay a comparatively minor move in the fuel price," Mr Neilson says.

Or other measures to compensate low-income earners and others for emissions pricing and reduction policies could have been considered.

In other jurisdictions, like British Columbia, the commitment to reduce emissions also involves a climate change tax rebate, compensating households for electricity and fuel price rises. All revenue from emissions taxes is also to be recycled into tax cuts.

"We want the Government here to ensure its emissions trading scheme is revenue neutral. When gains are made from selling emissions credits, the revenue should be recycled – not taken and kept in Government coffers.

"The only way to avoid the Kyoto bill is to reduce emissions.

"The cost needs to be devolved to the emitters so they make behaviour changes. For example, petrol users at some point will realise the single best no-cost way of achieving major fuel economy and emissions cuts is to go easy on the accelerator.

"Now that opportunity is reduced for another two years. And the bill for drivers with heavy feet goes to every taxpayer, and denies revenue to do other things – like cutting taxes, investing more in social services and new technology to cut emissions - from current revenue," Mr Neilson says.

"What's possible politically is what we will get. But all party leaders need to resist the appeal of postponing incentives to reduce emissions while not postponing the bill, and even making the tax bill bigger."


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